NTT joins fray for a byte in Patni

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NEW DELHI: Japanese conglomerate NTT Group has entered the race to acquire a majority stake in Mumbai-based Patni Computer Systems, the latest in a growing list of potential suitors said to be sizing up India’s sixth- largest software services exporter, two persons familiar with the matter told ET. (Watch)

Other potential suitors include L&T Infotech and Japan’s Fujitsu.

The persons said the $119-billion Japanese group was in talks to buy the 66% stake held by the Patni brothers - Narendra Kumar, Gajendra Kumar and Ashok Kumar - and private equity firm General Atlantic, which bought a 18% stake in the company in 2002.

The Patni brothers hold 48.3% in the company, while General Atlantic owns 18%. The promoters have been trying to sell their stake in Patni for the past few years. Plans to sell their stake fell through in 2007, as Narendra Patni was not ready to exit.

Patni CEO Jeya Kumar said the promoters had not indicated any desire to exit the company to the management. “We are not in discussions with NTT. We have an attractive business model and companies keep showing interest in us. The owners will not do anything which is detrimental for the company,” he said.

General Atlantic too was not available for comment.

An email sent to NTT, the second-largest telecommunications company in world in revenue terms, did not elicit a response. A deal could help NTT deepen its engagement in the Indian market. The group has an existing tie-up with HCL Technologies and its telecom subsidiary NTT DoCoMo acquired a 26% stake in Tata Teleservices last year.

Speculation about Patni being on the block has been doing the rounds for some years. Patni reported a third quarter net income of Rs 168.5 crore, down 6.5% from Rs 180.2 crore in the corresponding quarter a year earlier. Revenue during the quarter fell 1.5% to Rs 833.7 crore.

"Acquisition of Patni makes sense for a telecom company," said Diptarup Chakraborti, principal research analyst with consultancy firm Gartner.

Patni has reached a stage where the promoters will have to make a big acquisition or exit to allow the company to move into the next level, he said.

The over $60-billion Indian IT and IT-enabled services (ITeS) witnessed a slowdown last year due to the global financial meltdown. Several Indian technology companies in the country, which draw significant business from the US and Europe witnessed a slowdown due to demand crunch. As per industry body Nasscom, the domestic IT & ITeS industry will have a compounded annual growth of 12-14% in the next 10-12 years.

On Tuesday, Patni shares fell 3% to close at Rs 475.70 on BSE, valuing the company at around Rs 6,100 crore. The stock has risen 21% on the BSE since September 14, when talk of a stake sale resurfaced.